REPORTER'S PROJECT RUINS HIS CAREER

By JONATHAN FRIENDLY

Published: July 17, 1984

An investigation by a news organization often ends with the subject of the inquiry under a cloud and the reporter accepting praise. Carlton Sherwood's inquiry into alleged financial irregularities in the construction of the Vietnam Veterans Memorial in Washington has ended the other way around.

''It ruined me professionally,'' said Mr. Sherwood, a 37-year-old reporter who earlier won a Pulitzer Prize and a Peabody Award. He said his reports on the memorial's financing were fair and accurate, but the television station for which he did the inquiry would not defend it after a Federal investigation did not back up the reporter.

The history of Mr. Sherwood's inquiry provides new fuel for debate over whether some ''investigative journalism'' has become prosecutorial.

Many journalists say designating reporters as ''investigative'' raises problems by creating pressure for results and encouraging reports based more on suspicions than on proof of misdeeds. In libel suits plaintiffs often say the news organization was trying to ''get'' them.

They Want an Apology

The two men who were the subject of Mr. Sherwood's investigation, John P. Wheeler 3d, chairman of the Vietnam Veterans Memorial Fund, and Jan C. Scruggs, its president, did not sue. But they want an apology from television station WDVM in Washington. ''He really made us look like cheap crooks,'' Mr. Scruggs said.

The general manager of WDVM, Edwin Pfeiffer, said the station, a CBS affiliate, did not intend to apologize because it had already told its viewers it could not substantiate what Mr. Sherwood reported. ''There is no part of the story that I feel particularly good about,'' Mr. Pfeiffer said.

Mr. Sherwood's reports concentrated on how the memorial fund, a private organization, spent the $9 million it collected. In his series of reports, he said Mr. Scruggs and Mr. Wheeler had refused to provide financial information but that internal audits on file with the Better Business Bureau showed that only $2.6 million was spent on actual construction, that fund-raising costs were excessive, that $2 million was being banked for salaries even though the fund itself was to go out of business and that other money was ''diverted'' to promotional events instead of fulfilling ''promises'' to help other memorials.

The series by Mr. Sherwood, who was hired in March 1983 as WDVM's first ''investigative reporter,'' began on the evening news programs of Monday, Nov. 8, after heavy promotion.

They Charge Bias in Inquiry

While the reporting was under way, Mr. Scruggs and Mr. Wheeler told station executives that Mr. Sherwood was biased against the memorial and was relying too much on the word of H. Ross Perot, the Texas industrialist, and other declared opponents of the memorial's design. The station said there was no basis to the complaint, pointing out that such complaints were often lodged by subjects of investigations.

On the eve of the first program, Mr. Wheeler struck a counterpunch. He had refused to be interviewed, but Mr. Sherwood appeared at his home in Bethesda at 7:30 A.M. on the Friday before the broadcasts. The reporter was wearing a microphone that could transmit to recording equipment. Mr. Wheeler, a special counsel to the chairman of the Securities and Exchange Commission, told Mr. Sherwood to remove the microphone, and he did. Later Mr. Sherwood was arrested on Mr. Wheeler's complaint that he had violated a Maryland law against recording a conversation without permission.

WDVM reported the arrest with the first of Mr. Sherwood's series. The incident ''took the focus off them and put it on me,'' the reporter said.

The charge was later dropped. Mr. Wheeler said the station had erased the tape; the station and Mr. Sherwood said nothing had been recorded.

He Quits His Job

In December, the station refused to air a report by Mr. Sherwood saying the fund was not honoring an agreement to let outside auditors examine the books. The reporter quit.

A group of members of Congress, responding to the broadcasts, asked the General Accounting Office to examine the fund books. Its audit, made public this May, dismissed every charge that Mr. Sherwood raised.

It counted nearly $4 million in memorial building costs, $2.5 million for fund-raising, $1 million each for administration and promotion and $1 million left in the bank, and said all of it was properly spent. There was ''no evidence of any improper or illegal actions,'' the auditors concluded.

Mr. Scruggs and Mr. Wheeler have been seeking publicity for the audit, contending that it ''officially'' discredits the reporter's work. Mr. Wheeler said the only effective antidote to news workers' misconduct was ''humiliation before their peers.''

He Says Figures Varied Mr. Sherwood, who said his reports ''were so fair it was painful,'' said the figures the fund gave to the G.A.O. did not match the numbers on which he relied and that questions still remained about whether money was wasted. Mr. Pfeiffer said the G.A.O. audit was ''as definitive as anything that exists.'' Mr. Scruggs and Mr. Wheeler said that any differences between the audits could be traced to the dates of the fiscal years, progress in construction and other routine variations.

Both Mr. Pfeiffer and Mr. Sherwood said that the problem would not have developed if the fund had made its books available when the reporter asked to see them, that such refusals usually denoted efforts to hide guilty secrets.

WDVM has been looking for a reporter to take Mr. Sherwood's place, but Mr. Pfeiffer said future investigations would be ''more sensitive to the idea that the allegations could be proved wrong.''

Mr. Sherwood now works for The Washington Times, at a salary below the $100,000 WDVM reportedly paid him. In an interview published by The Washington Times when he went to work for WDVM, the reporter discussed risks in investigative journalism. ''The facts in this business are everything,'' he said. ''You don't get a second chance. If you mess up once, you're finished.''